Say Hello to the New Fastest Growing Drug in History!

Take every guess you had as to how well Gilead Sciences would perform in the first-quarter, no matter how outrageous, and completely throw them out the window because Gilead would have trumped it!

Break out your thesaurus because you'll need every word that is a synonym to "phenomenal" to describe exactly what Gilead delivered last night. For the quarter Gilead reported a 98% increase in revenue to $5 billion, saw product revenue in the U.S. skyrocket 159%, and recorded a 209% increase in net income. You know, just another quarters' work for Gilead.

Keeping in line with the jaw-dropping nature of the quarter, Wall Street estimates had called for Gilead to earn just $0.90 per share on $3.9 billion in sales. Gilead trumped that by $1.1 billion in revenue and $0.58 in EPS.

But, that still wasn't the single greatest figure from Gilead's report. No, that goes to hepatitis C drug Sovaldi which delivered (get this!) $2.27 billion in sales despite being approved by the Food and Drug Administration in December.

Sovaldi is revolutionary oral hepatitis C pill that in genotype 2 and 3 patients can be given without the need for interferon. Interferon has been associated with unpleasant flu-like side effects in patients, therefore Sovaldi offers a big improvement in patients' quality of care. Of course, there's a statistically significant benefit to the pill as well. In many instances during its clinical studies Sovaldi delivered a sustained virologic response (SVR) (i.e., an undetectable level of disease) of 90% or higher over 12 weeks in almost every instance (some cohorts required 24 weeks of treatment). When combined with ledipasvir in ongoing studies Sovaldi demonstrated SVRs of 93%-94% in just eight weeks. Long story short, Sovaldi really is impressive.

It's so impressive in fact that it just unseated Vertex Pharmaceuticals' hepatitis C therapy Incivek as the fastest growing drug in history. If you recall, Incivek took less than three quarters from its launch to obtain blockbuster status (i.e., sales in excess of $1 billion annually). Sovaldi just blew that out of the water. With sales hitting $2.27 billion during the quarter one can only assume it took just weeks for Sovaldi to crest the billion-dollar plateau. That's is truly astounding in every respect of the word.

But is it sustainable?The real question we need to ask, though, is whether or not this growth is sustainable.

In spite of its strong sales, there's quite a bit of backlash against Gilead Sciences' Sovaldi because the company priced its revolutionary drug at $1,000 per day, or $84,000 for a standard course of treatment. According to certain members of Congress and some U.S. citizens, that's far too steep a price to pay for a number of hepatitis C sufferers who simply can't afford the treatment. It's even more irritating to U.S. citizens considering that Sovaldi will likely be approved in ex-U.S. markets, including emerging markets, and be priced at a discount to its U.S. price point.

There's also the reality that Sovaldi won't be the lone hepatitis C therapy to make it to market. AbbVie's direct-acting antiviral (DAA) combo has demonstrated 90%-plus SVRs over 12 weeks in a number of studies, with the company just yesterday submitting its new drug application to the FDA for its DAA as an interferon-free treatment for genotype 1 HCV patients (the most common form of the disease). Considering that its DAA has been designated as a breakthrough therapy, a fast-track and potential approval before 2014 is over wouldn't be completely out of the question.

Source: Bristol-Myers Squibb

We also have Merck and Bristol-Myers Squibb ready to stick their feet in the door as well.

Bristol-Myers Squibb, for example, hit the magic 90% SVR mark over a 24-week period with its combination of daclatasvir and asunaprevir in genotype 1b patients. Keep in mind that although genotype 1 is the most common form of HCV, it's also the toughest to treat, so these 90% SVRs and higher really represent incredible improvement from the previous standard of care. Bristol's drug combo also produced an SVR of 82% over 12 weeks in patients that were non-responders to prior therapy.

Merck, on the other hand, has a relative wet-behind-the-ears midstage study under way with the combination of MK-5172 and MK-8742. This experimental combo delivered impressive SVRs ranging from 90% to as high as 100% over 12-to-18 weeks in a number of cohorts including treatment-naive, cirrhotic patients, as well as prior null responders.

The Foolish bottom line In short, I think it would be foolish for investors to expect Sovaldi's sales to grow at the ridiculous pace they did in the first quarter once additional competition enters the frame. The data surrounding AbbVie's DAA has been solid and would certainly be indicative of an approval within the next year.

But I also believe Sovaldi, barring an extremely undercut price point from the likes of AbbVie's DAA, should be able to hold its own and retain existing sales. Unless there's formal Congressional action taken against the company's chosen price point for Sovaldi I believe its revenue stream is pretty safe and investors can continue to expect around $6 billion-plus in annual sales from the blockbuster therapy. Hepatitis C is a big enough treatment space (an estimated 3.2 million people in the U.S. and 180 million worldwide) that it can accommodate multiple blockbuster therapies.

Investors should also take into account that Gilead's remaining infectious disease portfolio delivered healthy returns. Stribild, its HIV-1 therapy saw sales grow 134% while Complera/Eviplera sales gained 69%. While its future is very much tied to the success of Sovaldi, Stribild, an entirely in-house therapy, has the potential to garner blockbuster status in its own right a few years down the road.

I'm still, personally, quite bullish on Gilead Sciences and am waiting for any sizable pullback to consider establishing a position in my portfolio.

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